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China’s first quarter GDP grows 7.4 pct

Photo taken on March 17, 2014 shows the production lines of carmaker BAIC Group in Huanghua,

north China’s Hebei Province. Photo by Mu Yu

Photo taken on March 14, 2014 shows customers buying pork products in a supermarket

in east China’s Shanghai. Photo by Ding Ting

China’s first quarter

GDP grows 7.4 pct

By Zhu Shaobin, Guo Xinfeng, Yue Ruifang, Chen Siwu, Cheng Jing,

Shi Hao, Zhan Yan, Jiang Guocheng and Wang Xi

China’s economy outpaced market estimates in the first quarter of 2014, but economists cautioned that downward pressure remains, and targeted measures are needed to ensure growth falls within a proper range.

The nation’s gross domestic product (GDP) rose 7.4 percent year on year to 12.82 trillion yuan (2.08 trillion U.S. dollars) in the first quarter, the National Bureau of Statistics (NBS) revealed on Wednesday of April 16.

Market estimates had put first-quarter growth at 7.3 percent.

The figures suggest growth in the world’s second-largest economy in early 2014 was stable and that the economy was generally in good health, as Chinese authorities promoted reforms, innovation, restructuring and improvement of people’s well-being, according to the NBS.

However, the 7.4-percent growth was slow compared to the 7.7-percent growth in the fourth quarter of 2013 and marked the lowest quarterly growth level since the third quarter of 2012. The figure still outperformed the 6.6-percent growth in the first quarter of 2009, when the global financial crisis wreaked havoc.

Economists said the weaker growth suggested heavier downward pressure on the economy, but that the growth rate was still within a reasonable range.

“I predicted the first-quarter GDP growth to be between 7.2 and 7.3 percent. Though slower, I don’t think this level of growth is unbearable,” said Wang Jun, a senior researcher at the China Center for International Economic Exchanges.

The economic slowdown came with slower investment and industrial output. Other data jointly released with the GDP figures on Wednesday showed industrial output growth slowed to 8.7 percent in the first quarter.

During the same period, fixed asset investment growth gained 17.6 percent and retail sales expanded 12 percent, while the average per capita disposable income of both urban and rural residents grew 8.6 percent year on year.

These figures, alongside a one-percent drop in the nation’s exports and imports in the first quarter and slower power consumption growth, made some economists concerned that a slowdown may extend to next quarter. They wondered how the government would respond to secure stable growth that ensures employment.

Rather than a heavy short-term dose of stimulus, the government prefers “mini stimulus” programs with an eye toward medium and long-term development, some of which have already been announced by the Chinese government since March. These include a new urbanization plan and investment projects in public service sectors.

Wang pointed to measures taken by authorities targeting tax reductions and simplification of administrative procedures, as well as their plans to step up railway investment and renovation of shanty towns.

“These measures aim to stabilize growth. I think the economic momentum will increase from the second quarter and there’s no need to worry the economy will slide out of control,” he said.

Niu Li, an economist at the State Information Center, said that the government is poised to take fine-tuning measures and deepen reforms that are conducive to growth and market confidence, such as reducing taxes and financing costs of companies.

Chinese Premier Li Keqiang said earlier this month that China has the capabilities and confidence to keep its economy functioning within the proper range.

China has set this year’s economic growth target at about 7.5 percent, but the government is giving the target less emphasis. Premier Li said that as long as employment is sufficient and there are no major fluctuations, actual GDP growth will be considered to be within the proper range, even if slightly higher or lower than the target.

NBS data also showed a total of 2.88 million new jobs were filled by migrant workers in the first quarter, up 1.7 percent year on year.

Chang Jian, chief economist at Barclays, predicted a recovery of the Chinese economy in the second quarter.

“March’s new loans and total financing support the view that financing channels remain open to stabilize growth as demand recovers,” Chang said.

Data showed China’s new yuan-denominated lending came in better than expected, totaling 1.05 trillion yuan in March, up from 644.5 billion yuan in February. First-quarter new yuan loans totaled 3.01 trillion yuan, up 259.2 billion yuan year on year.

The economic slowdown also came amid mild inflation in the first quarter, with the consumer price index, the main gauge of inflation, rising 2.3 percent.

Chang forecast benign inflation to continue in the coming months, which leaves room for the central bank in tooling reserve requirement ratio cuts and even interest rate cuts if growth is disappointing in the second quarter.

Photo taken on March 27, 2014 shows workers welding together equipment parts at the

Chinese economy deserves

far-sighted optimismy

By Li Laifang, Lü Dong, Mou Xu and He Xinrong

China’s 7.4 percent economic growth in the first quarter has dismissed fears about a possible “hard landing” of the world’s second-largest economy, as some pessimists predicted.

Though it was the lowest quarterly rise since the third quarter of 2012, growth was stable and the economy was generally in good health, said the National Bureau of Statistics while announcing economic data on Wednesday.

China has set this year’s economic growth target at about 7.5 percent. Last year, it saw 7.7 percent growth, the same rate as 2012 and the lowest since 1999.

Despite downward pressure in the short term, China’s economy deserves far-sighted optimism, as opportunities and potential will arise from its restructuring, market-oriented reforms and opening up, which the top leadership has strived to promote.

“If you compare first quarter of this year to the same period last year and the year before, the first quarter has always been slower,” said Kenneth Jarrett, president of the American Chamber of Commerce in Shanghai.

“Data from the last 12 years show activities pick up quarter by quarter. It is a consistent pattern,” Jarrett told Xinhua. “I don’t sense at this stage any alarm, or great anxiety on the part of our members about what this means for full year likely results.”

One source of confidence is the encouraging performance of the Shanghai free trade zone (FTZ), which saw 433 foreign-funded firms registered in the first quarter. The number nearly doubled that of the previous quarter.

By the end of March, the number of new foreign companies hit 661 in the zone with accumulated registered capital of 3.3 billion U.S. dollars, said zone authorities.

“They (foreign companies) are here for the long term. Even if they track data from month to month, quarter to quarter, the focus is on longer term trends,” said the American businessman.

The Shanghai FTZ, established in September, has undergone a string of key reform measures, including easing cross-border use of China’s currency, the renminbi, liberalizing interest rates on foreign currency loans, and facilitating offshore financing and outbound investment. The Chinese government expects the FTZ’s experience to be copied in other regions.

The FTZ is part of a package of reform measures in the country and only needs time to reap the benefits for sustainable economic growth.

The Chinese government has vowed to abolish or delegate another 200 administrative approvals to governments at lower levels this year, following 416 administrative approvals that were abolished or delegated last year.

China began adopting a package of business registration reforms on March 1, easing requirements for minimum registered capital and business venues.

The move has boosted a jump in new enterprises. Newly registered market entities increased 37 percent in Shanghai and 31 percent in the northwestern province of Gansu in March.

Nationwide, 309,500 new enterprises were set up in March, or a 45.8-percent year-on-year rise, and their total registered capital grew 103 percent to hit 1.47 trillion yuan, said the State Administration for Industry and Commerce on Wednesday.

The reform greatly boosted market vitality, said Chinese Premier Li Keqiang during an inspection tour last week in the southernmost province of Hainan after attending the Boao Forum for Asia.

To keep China’s economic growth within a “reasonable range,” local authorities must dare to shoulder responsibilities and work out effective measures to advance reform, expand domestic and international markets and nurture development momentum, he said.

“China’s leaders want the government to retreat from being too active in the economy and let the market itself have a stronger role. And for foreign companies, that is good news because that’s what they prefer,” said Jarrett.

In the first quarter, inland Chongqing Municipality contracted foreign capital worth 410 million U.S. dollars, a 19-percent year-on-year jump. Its actual use of foreign capital hit 2.15 billion U.S. dollars, said Xu Qiang, head of the municipal foreign trade committee.

Hyundai Motor Group said last month it will build a fourth China plant in Chongqing. A number of foreign investment projects are in discussion in Chongqing and “the amount of actual foreign investment will increase remarkably in the second half of this year,” he told Xinhua.

Chongqing’s foreign trade in the first quarter grew 82.3 percent year on year to reach 131.8 billion yuan, with exports expanding 61 percent.

“The speed of economic development may slow down, but driving forces remain and show good prospects,” said Xu.

Besides the comprehensive reforms, Chinese leadership has put forward ideas such as the Silk Road economic belt and the coordinated development of Beijing, Tianjin and Hebei.

Consumption by China’s huge aging population and the country’s environmental protection-related industries are also promising sectors for driving economic growth.

CHINAVOICE

Fast or slow,

China needs new path to grow

By Chen Siwu, Xu Zilin and Pei Xingchen

The guessing game over China’s economy is over, but just for now.

The National Bureau of Statistics said Wednesday that China’s year-on-year GDP growth slowed to 7.4 percent in the first quarter, lower than the full-year target of 7.5 percent but higher than the 7.3 percent widely expected among economists.

The growth rate should be no cause for panic. Why? Because globally, the world economy is still struggling through the financial crisis, and domestically, problems are still deeply rooted in the financial and property sectors, which will inevitably weigh on growth in the world’s second-largest economy.

Nonetheless, 7.4-percent quarterly GDP growth is not a level that can drag China into the abyss of collapse, but neither will it trigger a massive stimulus the size of that seen in 2009, even though some are desperately crying for it.

For major economies, China’s latest GDP data remain enviable, given the 2.8-percent GDP growth for the G20 countries, which contribute about 85 percent of global economic output.

It’s not the first time for China’s quarterly GDP to fall short of the government’s annual GDP growth target. For example, its GDP growth barely reached 6.6 percent year on year in the first quarter of 2009. In 2001, when China joined the World Trade Organization, the full-year growth rate was merely 7.3 percent. The Asian financial crisis in 1998, the most recent massive crisis until the global financial meltdown, also slumped China’s GDP growth to only 7.1 percent.

For a long time, too many people have paid too much attention to the speed of China’s GDP growth, while too few have cared about its quality.

The excessive concerns over short-term GDP data can easily make people obsessed with GDP as the sole criterion for economic success ignore other development goals, like residential income, employment and air quality, which have sparked frequent protests and complaints in the country.

Based on the growth-at-all-costs mentality, some projections by investment banks seem nonsensical as they blame the Chinese government’s crackdown on corruption and prostitution for some of the economic slowdown.

When it comes to economic growth speed and quality, slower growth offers China not only a stress test for its unsustainable growth model, which relies too much on investment and credit binge, but also a rare opportunity to rethink the direction it should take to sustain the economy.

As the world’s second-largest economy, a richer China needs to prioritize economic quality through industrial restructuring and upgrading, rather than the indiscriminate short-term growth that has choked the skies, tainted rivers and polluted the soil in the past,

China is now in a transition period of boosting productivity and advancing economic quality. Launching another massive stimulus package, as speculated by some analysts, is not in the interests of the country, nor is it within its capacity due to exploding debt levels and asset bubbles in recent years.

Therefore, a wait-and-see tactic would serve Chinese policymakers best now, as the economy is within the “proper range,” marked by tamed inflation and a relatively robust job market.

To seek a new path that is less dependent on investment and more reliant on innovation and consumption, slower growth is a cost China must pay for healthier sustained growth.

To reshape a more competitive and productive Chinese economy, stimulus measures should only be put in place during exceptional times, such as crises, not used as a regular weapon. If a pistol is enough, one doesn’t need to carry a bazooka all day long.

Those who cry for massive stimulus the size of that in 2009 are pointing toward a wrong path for China, much like a dog barking up the wrong tree.

NEW POSTupdated on April 17, 2014

COMMENTARY

Better GDP growth beats

“China Collapse” theory

By Deng Yushan

Official data show that China’s GDP grew 7.4 percent year on year in the first quarter, 0.3 percentage point lower than the pace in the previous three months.

No sooner did Chinese statistical authorities release the figures than some merchants of doom pointed at the slowdown and whipped up a new round of gloom-mongering over the future of the world’s second largest economy.

But their claims that China’s economic impetus is fizzling out and that the Asian giant is headed for an economic hard-landing are baseless and misleading.

For starters, despite heavy downward pressure, China’s growth pace in the first quarter still exceeds the 7.3-percent market estimation and belongs to the top echelon across the world.

Factoring in Beijing’s strong-willed and game-changing endeavors in economic restructuring, the 7.4-percent rate remains within the reasonable range.

After all, it is natural for an economy to decelerate during structural adjustment, and the results of a better-structured economy and a more balanced growth pattern will make the downtick worthwhile.

As a matter of fact, an overwhelming majority of economic observers and pundits worldwide remain sanguine in China’s economy. Their optimism is shrewd and well-founded.

China’s efforts to boost domestic consumption have begun to pay off. As a manifestation of the increasingly large role of consumption spending, the household final consumption expenditure accounted for 64.9 percent of GDP in the first quarter.

In another sign of the great growth potential of the Chinese economy, official figures show that in the first three months traditional industries such as steel and cement were outpaced by high-tech industries, which constitute a pillar of future growth with mounting significance.

Meanwhile, with business activity picking up, China’s endogenous power of economic growth has gradually recovered. Employment is also improving, and foreign trade is making a turn for the better as the recovery of European and U.S. economies takes root.

After more than three decades of rapid economic growth, the Chinese government and public have both realized that pursuing growth at all costs is not good at all.

What China really needs is not an economy expanding at a blistering pace but one that grows in a sustainable and healthy manner at a reasonable and steady speed. And China is getting just that.

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